Advertisement

Recession Closes in with Business Confidence Crashing Lombardi Letter 2017-08-16 02:05:04 Economic growth recession U.S. economy business cycle economic indicators federal reserve Historical economic indicators suggest there’s not much economic growth in the U.S. economy ahead and that a recession could the most likely event now. Here’s the full story. 2017,News,U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2017/08/iStock-825394862-150x150.jpg

Recession Closes in with Business Confidence Crashing

U.S. Economy - By |
recession

iStock/vaeenma

The public has been sold on the idea that there’s growth in the U.S. economy. Buying into this false optimism could be a big mistake. The reality is, if President Donald Trump doesn’t get those proposed corporate tax cuts through soon, a homegrown recession could be just around the corner.

For economic growth to happen, a few things must occur. We should see more jobs available for citizens, good business conditions, increasing income, and improving general economic growth rates.

Advertisement

Sadly, the U.S. economy is failing to achieve all these factors.

Another Sign Jobs Market Lacks Growth

The jobs market is fundamentally tormented. Don’t pay too much attention to the headline unemployment rate. It doesn’t really tell the whole story.

The number of “gig workers” is growing in the U.S. economy. According to Intuit, Inc., a business solutions company, gig workers amount to 34% of the U.S. workforce and are expected to increase to 43% by 2020. (Source: “Intuit: Gig economy is 34% of US workforce,” CNN Money, May 24, 2017.)

What’s a gig worker? A gig worker does freelance work for companies like Uber Technologies Inc., Lyft, Inc., and others. These gigs don’t really pay well. Usually, individuals work with these companies to earn extra cash on the side.

But this is not the only thing that suggests there’s not much growth in the U.S. economy and a recession could be ahead.

Business Confidence Toppling

If you want to know where an economy is headed, pay attention to its business confidence. Remember, businesses usually see a slowdown before it starts to show up in the economic data.

There’s bad news for the U.S. economy on this front that never made it to the headlines: CEO confidence is plunging.

The Conference Board’s Measure of CEO Confidence collapsed in the second quarter. This is essentially an indicator tracking CEO confidence. (Source: “The Conference Board Measure of CEO Confidence,” The Conference Board, July 6, 2017.)

Currently, 41% of CEOs expect economic conditions to improve over the next six months. In the first quarter, this figure was about 65%. This is a massive decline in their sentiment and shouldn’t be taken lightly.

Recession Unavoidable?

Dear reader, the unprecedented money printing by the Federal Reserve following the financial crisis of 2008 and years of historically low interest rates have given an illusion that there’s growth in the U.S. economy. Stock markets have made it look that way, too.

But this is not the reality. The stock markets have priced in corporate tax cuts by the Trump Administration. If the Republicans couldn’t get Obamacare repealed, how will they get those tax cuts through?

In 2017, the Federal Reserve is adamant about raising interest rates. Rates have gone up three times since December 2016. If our economy is in the tank, the Fed raises interest rates again this year, and the stock market finally tops out, how can we possibly escape a recession? We won’t. A recession is the most likely scenario in the fourth quarter of 2017 and first quarter of 2018.

Related Articles